Jeremy Corbyn's plans to hike corporation tax to 26 per cent are already under fire

 
Mark Sands
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Corbyn and shadow education secretary Angela Rayner launched the plans earlier today (Source: Getty)

Labour has revealed dramatic plans to hike corporation tax as part of a bid to raise cash for a schools spending spree.

Jeremy Corbyn's party unveiled the plan at a college in Leeds earlier today, vowing to increase bills for firms throughout the next parliament.

The top rate corporation tax is currently charged at 19 per cent, but Labour said today it would increase the levy in steps, reaching 26 per cent by 2020/21, and raising £20bn.

The lower rate of corporation tax, paid on profits below £300,000, would also rise to 21 percent.

However, the proposal has already come under fire.

Read More: Corbyn threatens to come after ‘greedy bankers and crooked financiers’

The highly respected Institute for Fiscal Studies has already urged caution over the reforms.

IFS associate director Helen Miller said: "Were rates to be increased, the benefits of additional revenue would need to be weighed against any long run effects on growth. We should always remember that all taxes are paid by people and that workers can feel the effect of corporation tax indirectly though lower wages."

British Chambers of Commerce director general Adam Marshall added: “While many businesses I speak to say they would not mind paying a slightly higher rate of corporation tax if it meant business rates and other damaging upfront taxes were lowered, this proposal will alarm them.

"No business wants to see huge increases in profit taxes, and a rate of up to 26% would hardly send the message that Britain is open for business as we navigate Brexit."

And free market think tank the Institute of Economic Affairs branded the move "a big step backwards".

Read More: Businesses aren't convinced by Theresa May's corporation tax cut

IEA chief executive Julian Jessop said:"They are trying to sell the policy as rebalancing the tax burden towards the ‘rich’. But the reality is that everyone benefits when companies are encouraged to invest and create jobs.

Indeed, big increases in tax rates rarely translate into big increases in tax revenues, because they undermine growth and incomes for all.

"What’s more, with many other countries now planning to cut corporate taxes, Labour would make the UK a much less attractive location for global businesses. This is exactly the wrong signal to send as the economy prepares for Brexit."

Prime Minister Theresa May's Conservative party plans to lower corporation tax to 17 per cent by 2020.

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